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CMA Final · Entrepreneurship and Startup · The Entrepreneurial Ecosystem

In the language of startup funding, the 'valley of death' refers to which stage of a venture's life?

The valley of death is the early phase after seed capital has been used up but before the startup generates sufficient revenue or obtains larger funding. Cash burn is high and income is low, so many ventures fail in this gap.

  1. AThe period after an IPO when the share price falls sharply
  2. BThe early phase after initial seed money is spent but before the venture earns enough revenue or secures larger fundingCorrect
  3. CThe stage when a mature firm is wound up under insolvency law
  4. DThe period when founders exit and hand over control to professional managers

Explanation

The valley of death is the cash-negative gap between early capital (such as seed or grant money) and the point where revenue or later-stage funding sustains operations. Many ventures fail here because they burn cash before proving a scalable model. The IPO-related and insolvency options describe different events.

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